Peter Boettke, F. A. Hayek: Economics, Political Economy and Social Philosophy, Great Thinkers in Economics Series, Palgrave Macmillan, 323 pages.
This is an ambitious book on the career of one of the very significant thinkers of our time. Friedrich A Hayek lived through most of the twentieth century from 1898 to 1992 and his working life spanned three score years and ten. His work runs so wide and deep that no single author or book could do justice to it.
The theme that unifies Boettke’s densely packed account is the need to place economic events in their institutional, social and cultural context. Adam Smith and the great classical thinks embraced the broad expanse of political economy and moral philosophy but the focus of economic analysis contracted to a narrow point in the 20th century. Boettke refers to the “hourglass of economics” and he wants to see that shape restored by wider and deeper institutional studies including attention to the moral framework of society.
Peter Boettke is Professor of Economics and Philosophy at the George Mason University in Fairfax Virginia. He is the immediate past president of the Mont Pelerin Society and a prolific contributor to the literature of Austrian economics.
Boettke sketched four stages in Hayek’s progress. His concern with economics persisted like a long thread in the tapestry of his thought and he added more threads as he discovered that economics alone was not enough. In the first phase from 1920 to 1945 he concentrated on the function of prices for coordinating economic activities and his work on monetary theory and the trade cycle earned him a prestigious chair at the London School of Economics in 1930 at the ripe age of 32.
In the second phase between 1940 to 1960 he explored the “abuse of reason” with books and essays on methodology including The Counter-Revolution of Science and The Road to Serfdom. In the third phase, roughly from 1960 to 1980, he moved on to the “restatement of liberal principles” with The Constitution of Liberty and the three volumes of Law, Legislation and Liberty.
The fourth phase on “philosophical anthropology and the study of man” produced The Fatal Conceit where he tried to wrap up all his arguments against socialism into a package. This work was edited by his official biographer at the time, William Warren Bartley (1934-1990) who raised funds to launch the project to produce a new set of collected works at the University of Chicago Press. Bartley only lived long enough to see the first volume and the project is proceeding under the general editorship of Bruce Caldwell, Director of the Center for the History of Political Economy at Duke University in North Carolina.
The critical turning point in Hayek’s career came in the 1930s when he was debating with Keynes on economic policy and with the socialist central planners led by Oscar Lange on the possibility of dispensing with markets to set the prices of goods. Both debates went badly for Hayek, at least in the generally accepted view. The problem of communication that Hayek encountered made him realise that deep currents of thought were driving Keynesianism beyond the temptation to tell politicians what they wanted to hear about the way to handle the Great Depression.
He embarked on prodigious studies in the history of ideas in philosophy, political economy and methodology to grapple with the presuppositions that drove Keynesian demand management, mathematical formalism, the newly emerging general equilibrium theory and the hubris of the would-be central planners. He saw problems at the micro level in the form of misplaced confidence in the methods of the natural sciences and he saw major defects at the macro level in lack of attention to institutions and incentives.
One of the drivers was logical positivism, the new philosophy of science that emerged in Vienna. Hayek’s older colleague Ludwig von Mises saw the threat coming in the 1920s and directed a salvo of articles against it but the diaspora fleeing from Hitler planted the ideas in the great universities of the English-speaking world. Hayek resumed the attack with The Counter-Revolution of Science (1952).
At the macro level he took up the study of institutions, prompted by Lange’s refusal to consider incentives as factor in economic affairs. He pursued the great task of institutional analysis in the United States where he moved in 1950, partly for financial reasons with an ex wife and a current wife to support. He was so out of fashion in economics that he was not wanted in the Department of Economics and instead he joined the Committee on Social Thought. This was established by members of the older Chicago school led by Frank Knight who thought that economics was becoming too specialised. Around that time a remarkable array of talents joined the Committee including T. S. Eliot, Mircea Eliade, Hannah Arendt, Leo Strauss and the novelist Saul Bellow.
He wrote The Constitution of Liberty to address some of the pressing issues of the size of government and the amount regulation required without exceeding some appropriate scope and limits. The scope and limits of course remain hot topics. The book ends with a ringing challenge that Boettke took up and repeated “We must make the building of a free society once more an intellectual adventure, a deed of courage…if we can regain that belief in the power of ideas which was the mark of liberalism at its greatest, the battle is not lost” . That is the motif of the last chapters of the book treating Hayek’s efforts to keep the liberal program alive as a vital and progressive intellectual tradition. He launched the Mont Pelerin Society in 1947 to maintain communication between liberal scholars.
Under the heading “Liberalism is Liberal” Boettke signalled some of the intellectual battles that the scholars have to fight including the idea famously articulated by Kevin Rudd that liberalism will usher in a “brutopia”. Boettke cites a prominent academic left liberal on the same theme “Compassion, justice, civic responsibility, honesty, decency, humility, respect, and even survival of the poor, weak and vulnerable – are all to take a back seat.” . Left liberals have exploited that widespread perception to exert a powerful emotional appeal by virtue signalling on the themes of justice and helping the poor. These were appropriate from Christianity and classical liberalism while the actual existing institutions of Christianity and classical liberalism are excoriated and subjected to relentless attack. The idea of the welfare state gained traction after the industrial revolution because neither the conservatives at the time nor the leaders of the labour movement understood how laissez faire capitalism was advancing the welfare of the able bodied poor and generating the wealth that could be channelled through private and charitable efforts to deliver all the health, education and welfare services that socialists might desire.
The reform agenda of economic liberals is often depicted as narrow in its focus, lacking moral, cultural and spiritual depth, summed up in the comment that economists know the price of everything and the value of nothing. This indicates the need to include a robust moral framework among the pillars of classical liberalism, alongside the rule of law, the range of freedoms, non-discriminatory laws, justice and limited government. This framework would include honesty, compassion, self-reliance, social responsibility, charity, prudence, civility and tolerance.
One of the exciting developments in modern liberal scholarship is the growing awareness or at least the rediscovery of the synergy of markets and morals. The idea was not new to Adam Smith when political economy was closely related to moral philosophy and of course his first book was The Theory of Moral Sentiments. It was in the air at the Mont Pelerin Conference in 1989 with The Fatal Conceit hot off the press and cognate publications like The Ethics of Economic Freedom (CIS 1989). The late Michael Novak was a major modern pioneer on that front with The Spirit of Democratic Capitalism (1982) and Free Persons and the Common Good (1989). Lately Deirdre McCloskey weighed in with multiple volumes in defence of the bourgeois virtues.
Surveying Boettke’s achievement in this book, he has beaten a path through several decades of intensive work by a great thinker to identify the most important and fruitful line of march for scholars and friends of liberal democracy. F. A. Hayek: Economics, Political Economy and Social Philosophy is a challenging work of scholarship designed to provoke more efforts to explore the implications and applications of critical rationalism, Austrian economics and non-socialist (classical) liberalism. He could have mentioned that Hayek’s close friend Karl Popper was a fellow traveller in the project but that is another story and this vessel is loaded to the gunwales already. To conclude, we are fortunate that the ideas of Hayek and classical liberalism have found such an enthusiastic and energetic champion in Peter Boettke.
A longer version of this review is in the December edition of the Australian monthly Quadrant.